Which one of the following conditions exists at the point where a firm maximizes its value?
A)The tax benefit from an additional dollar of debt is zero.
B)Financial distress costs are equal to zero.
C)The debt-equity ratio is 1.0.
D)WACC is minimized.
E)The cost of equity is minimized.

Question

Quizplus · Accepted Answer

A firm maximizes its value when its Weighted Average Cost of Capital (WACC) is minimized, as this indicates the lowest average cost of financing and thus maximizes the firm's value.

Which One of the Following Conditions Exists at the Point